LONDON: The boom in Tadawul-listed real estate investment trusts (REITs) continues with details emerging on Monday about one of the largest so far — a vehicle owned by Derayah Financial that will raise more than SR1.1 billion according
to a statement from the company.
Subscription for the Derayah REIT will start on Dec. 27 and end on Jan. 7, 2018, said the announcement.
Derayah added it would be one of the biggest and most diversified funds with properties in sectors that span offices, residential, warehouses, retail and hospitality.
The REIT is invested in 15 assets, located in six cities: Riyadh, Dammam, Jubail, Khobar, Jeddah, and Al-Ahsa.
Derayah Financial is licensed by the Capital Markets Authority, which announced the company’s plans to list on the Saudi stock exchange on Dec. 6.
During the subscription period, investors can apply for subscription via Riyad Bank, National Commercial Bank, Arab National Bank, and Derayah Financial. The minimum subscription amount is SAR10,000.
The company said the REIT would distribute at least 90 percent of its net profits every six months. Net yield to investors is expected to reach 7.22 percent in the first year of operations.
Commenting on the offer, the CEO of Derayah Financial Mohammed Al-Shammasi said: “As part of our efforts to present unique investment products to our clients, we are now launching the most diversified REIT in terms of the number of properties, the geographic distribution, and the number of tenants, with an attractive return on investment that is higher than the currently traded REITs.”
About six Saudi REITs have listed on the Tadawul in recent months following legislation passed at the end of 2016, clarifying the rules governing the listing of these property vehicles that have long been around in Europe and the US but are relatively new in the Gulf. Two have been launched since in Dubai since 2014.
In a comment posted on Knight Frank’s website, Raya Majdalani, regional research manager, said Saudi REITs were being driven by capital seeking exposure to the Kingdom’s commercial real estate market. He added every REIT that had been listed in the Kingdom initially traded at a large premium to Net Asset Value (NAV), indicating investor appetite for income producing real estate as well as the potential depth of the market.
Said Majdalani: “Over the longer term, REITs are expected to increase private-sector participation in the financing of real estate markets by accessing additional pools of capital. This is in line with government efforts to stimulate the real estate sector in Saudi Arabia by attracting private-sector investments while serving the broader target of the strategic economic reforms aimed at diversifying the Kingdom away from its dependence on the hydrocarbon sector.”
But he added there were a number of headwinds that could challenge the development of the REIT market in Saudi Arabia. A major factor would be the quality and supply of suitable assets that can be placed within REIT structures.
“In general the Saudi Arabian market is dominated by lack of instructional-grade real estate when compared to the markets of both emerging and mature REIT jurisdictions. As the success of the REIT market will in part rest on a sustainable pipeline of future assets, the softening of the current economic climate could hinder the development sector and with it future supply,” said Majdalani.
Historically, the main attraction of REITs for investors has been the dividend yield, based in part from rising rental income and portfolio growth — but there is also the potential to benefit from capital appreciation. But this, like everything else linked to the stock market, is not guaranteed.
REIT boom gathers pace in Saudi Arabia
REIT boom gathers pace in Saudi Arabia
Free trade negotiations between GCC, India mark new phase of partnership, says sec-gen
RIYADH: The Gulf Cooperation Council’s secretary-general affirmed that the negotiations for a free trade agreement between the GCC and India, and the signing of the joint statement, represents a new phase of strategic partnership.
Jasem Mohamed Al-Budaiwi said that this contributes to enhancing close cooperation and strengthening economic and trade ties, according to the Saudi Press Agency.
This came during the signing ceremony of the joint statement on launching the free trade agreement negotiations between the Al-Budaiwi and India’s Minister of Commerce and Industry, Piyush Goyal, which took place in New Delhi, on Tuesday.
During the signing ceremony, Al-Budaiwi said that the Terms of Reference, signed on Feb. 5, provide a comprehensive and clear framework for these negotiations. The two nations agreed to discuss enhancing cooperation in vital strategic areas, including trade in goods, customs procedures, and services.
Additionally, the framework covers Sanitary and Phytosanitary measures, intellectual property rights, cooperation on Micro, Small, and Medium Enterprises, along with other topics of mutual interest. This reflects the comprehensive nature of the agreement and its ability to keep pace with the future economy.
Al-Budaiwi expressed hope that these negotiations would lead to a comprehensive and ambitious free trade agreement that works to remove customs and non-customs barriers, enhance the flow of quality investments in both directions, and achieve further liberalization in trade and investment cooperation between the GCC and India for mutual benefit.
This would provide a stimulating economic environment and an investment climate that opens broad horizons for the business sector, supports supply chains, and accelerates the pace of economic growth in line with the ambitious developmental visions of the GCC states.
The top official affirmed the full readiness of the General Secretariat to host the first round of negotiations at its headquarters in Riyadh during the second half of this year.
The two sides held a meeting during which they reviewed the existing cooperation relations between the GCC and India and discussed ways to develop and elevate them to broader horizons, serving mutual interests and enhancing opportunities for strategic partnership between the two sides, particularly in the economic, investment, and trade fields.
They praised the role undertaken by the negotiating teams from both sides, appreciating the efforts contributing to reaching a comprehensive agreement that enhances economic integration and supports the smooth flow of trade between the two nations.
